This is marketing research on the Coffee industry and can include information on the background, market structure, definitions, competitors, trends and developments of coffee and is related to other topics such as tea, beverages and drinks.

Table of Contents

Table of Contents

1 Market Structure 
2 Industry Definitions 
3 Market Metrics 
4 Industry Players 
5 Trends and Recent Developments 
6 Sources

Market Structure

Coffee is a heavily traded commodity and ranks sixth by value globally. In 2000, the worldwide coffee trade was worth US $33 billion. Coffee demand dropped in 2001 to 2003, with growth falling to 1%. Small and medium sized producers suffered the most from this drop, while the growth in retail sales mitigated the effect on coffee retailers.

Two types of coffee beans are in highest demand - Coffee Arabica and Coffee Robusta, the latter of which has seen strong growth due to increase in instant coffee sales. Brazil and Columbia are the world’s largest producers of arabica coffee, which is generally in higher demand than robusta coffee. Most coffee futures are based on arabica coffee prices. Vietnam is the world's largest producer of coffee robusta.

In early 2009, coffee was trading at approximately US 1.22 per pound. This has only reflected a recent drop in high coffee prices during 2008. Participating in the rise of almost all commodity prices during 2008, coffee prices exceeded US 1.60 per pound briefly in March 2008. In comparison, a recent low in coffee was at 68 US cents per pound in August of 2004.

Coffee is likely to stay at these relatively high prices during 2009. The US Department of Agriculture in January 2009, estimated that coffee producers had slightly less than 40 million bages in stock, which is only 39% of the normal coffee annual usage of 120 million bags. This has been driven heavily by expectations of a smaller crop in Brazil in 2008-2009.

Industry Definitions

• Caffeine: an alkaloid compound which acts as psychoactive stimulant.
• Café latte: espresso coffee with milk
• Café Macchiato: espresso with steamed milk
• Cappuccino: equal parts of espresso and milk froth
• Americano: small shots topped with hot water to give similar strength to coffee which is drip-brewed
• Body: describes physical properties of coffee
• Astringency: after-taste sensation similar to a dry feeling; this is not desirable in coffee

Market Metrics

United States Exports and Imports

U.S. imports for the 4th quarter 2006 totaled 5.773 million bags, down 7.4% from the 3rd quarter's 6.232 million bags. U.S. imports were up by 2.1% from 5.653 million bags from the same quarter in the prior year.

As opposed to futures prices now of US 1.22 (Jan 09), average retail prices during the mid-2000 decade (2005) averaged about US $3.20 per pound. The United States consumes one-fifth of global coffee production - it is the world’s largest consumer of coffee.

World Market

The U.S. Department of Agriculture's December 2006 estimate for 2006-07 was that world coffee production had increased to 128.6 million bags, up 4.9 million bags from its June 2006 estimate. Production in 2006-07 was estimated at 13% above the 2004-05 period. Coffee production in 2008 is now estimated at approximately 120 million bags.

World coffee exports totaled 7.75 million bags in July 2007, an increase of 1% compared with the volume of 7.67 million bags recorded in July last year. Total exports in the first 10 months of coffee year 2006-07 (Oct-06 to Jul-07) were up by 13.3% from the same period last year, totaling 81.52 million bags compared to 71.94 million bags in the prior year.

Total annual production of coffee was estimated at approximately 6.8 million tons in 2007 and was expected to grow to about 7.5 million tons during 2008. Coffee is normally shipped in bages weighing 60 kilos or about 130 pounds.

The top 5 global producing countries of coffee in 2007 are as follows:

Country                      Estimated Production
                              (millions of bags)

Brazil                               35
Vietnam                              18
Columbia                             12
Indonesia                             6
Ethiopia                              5

The following countries also each produce more than 2 million bags annually:

• Costa Rica
• Guatemala
• Guinea
• Honduras
• India
• Indonesia
• Ivory Coast
• Mexico
• Peru
• Uganda

Colombia was traditionally the world's 2nd largest coffee producer, but has been eclipsed recently by Vietnam which greatly increased production during the 1990s. Again however, Columbia produces the more preferred arabica coffee, while Vietnam has concentrated on robusta.

Industry Players

• Nestle

Market leader in coffee production with Nescafe as its flagship product. The company's chief markets are the United States, France, Germany, Brazil, the United Kingdom, Italy, and Japan. Popular coffee brands include Nescafé, Taster's Choice, Ricoré, and Ricoffy. Roasted and ground coffee brands include Nespresso, Bonka, Zogas, and Loumidis.

• Kraft Foods Inc

Philip Morris (Altria) recently spun off Kraft Foods, one of the world's largest coffee producers, in June 2001. Philip Morris first entered the coffee market by purchasing the world's largest coffee roaster, General Foods Corporation, in 1985. Kraft Foods' coffee brands in the United States included General Foods International Coffees, Gevalia, Maxim, Maxwell House, Sanka, Starbucks (under a licensing agreement), and Yuban. Its international brands included Carte Noire, Gevalia, Grand' Mère, Kaffee HAG, Jacobs Krönung, Jacobs Milea, Jacobs Monarch, Jacques Vabre, Saimaza, Kenco, Maxwell House and others.

• Sara Lee

Formerly Sara Lee Coffee & Tea Worldwide. Services both retail and global food service sectors. In Europe, sells Douwe Egberts. In South American, sells Carclo, Cafe do Ponto, and Pilao.

• Proctor & Gamble

The P&G coffee portfolio includes premium coffee brands such as Folgers Gourmet Selections and Millstone. It also recently announced in 2007 that it will sell direct to Dunkin Donuts.

Trends and Recent Developments

Coffee prices in mid 2007 had slumped 15% from their recent peak in late 2006. As indicated above, however, in mid 2008, they rose to US 1.60 per pound but by year end, had since dropped 25% from their peak.

In the U.S., taking advantage of the economic recession, brands such as McDonalds and Dunkin Donuts have expanded their premium offerings as the American consumer has suddenly become price conscious. Starbucks has recently (Jan 09) announced it will increase the number of store closings to 900, from 600 announced during 2008.

Sources

U.S. Department of Agriculture

Corporate websites

ICE Futures